Outstanding Achievement
AwardThe City of Buffalo and American Water WorksPrivatization of
Water Treatment

In August 1997, the City of Buffalo and
AmericanAnglian Environmental Technologies (a subsidiary of American Water
Works) signed a five-year, full service contract to operate the city’s
water treatment facilities, including the 160 million gallons per day
plant, pumping stations, storage facilities, 785-mile transmission and
distribution system, as well as provide customer, billing and collection
services for both water and sewer for 320,000 people.

Like many cities, Buffalo faced the
challenge operating and maintaining an aging system that was becoming
increasingly more expensive. By 1997, the City projected the cost of
running the system was $14.4 million annually, or $71 million over the
next five years.

The decision to seek a public/private
partnership for the water system was met with strong opposition from the
leaders of the four unions representing 180 Water Board employees. The
opposition was intensified by news that at least two of the firms in the
bid process intended to include layoffs in efforts to reduce the workforce
by up to 30 percent.

Despite this opposition, the city
administration estimated that forming a partnership could reduce rates by
as much as 10 percent, saving the City between $3.9 and $4.25 million
annually.

Upon completing the bidding process, the
City of Buffalo selected AmericanAnglian as its private partner.
AmericanAnglian proposed annual fees producing an immediate savings of
$4.4 million per year. This saving was so significant that the City was
not only able to avert a planned 12% rate increase, but it was able to
reduce existing water rates by 8%. In effect this was the equivalent of a
20% rate savings, or more than double the city’s original
projection.

AmericanAnglian proposed that all existing
employees be retained by the City and be managed by AmericanAnglian. The
agreement included no reduction in the employee’s current benefits or
civil service status.

Following the initial 8% rate reduction,
rates have remained unchanged through 1999 and no increase is projected in
the foreseeable future. In 1999, a new agreement was reached between the
City and AFSCME Local 264. The members of this local who come under
management of AmericanAnglian actually received pay increases greater than
members who are managed by the City.

AmericanAnglian is also making investments to help turn
around depressed areas of the city. Within seven months of signing the
partnership agreement, AmericanAnglian announced that it would construct
its new Northern Customer Service Center and Regional Headquarters, a
10,000 square-foot facility, in an economic development zone within the
city. The building was developed by a minority-owned business and
completed in late 1997. To ensure the continued economic development of
this area of the city, AmericanAnglian in January 1999 founded the
Exchange Street Business
Association.